Child Benefits in Iceland
Child benefits are intended to alleviate the financial burden on families with children and make their situation more equal. A specified amount is paid to parents for each child until it reaches the age of 18 years. The amount of the child benefit depends on the parents' income, their marital status and the number of children. In Iceland, the Director of Internal Revenue handles the calculation of child benefits.
Child benefits
Payment of child benefits begins one year after the child is born or moves to Iceland. They are paid until the child reaches 18 years of age. The benefits are paid out four times a year. Payments are made in advance on 1 February and 1 May. Following income tax assessment around mid-year, the advance payment is deducted from the year’s entitlement, as determined when the tax is assessed, and the remaining balance is paid out on 1 June and 1 October.
Child benefits are income-linked and determined based on the parents’ tax returns. Income earned abroad affects the calculation of child benefits just as income in Iceland. Child benefits are not considered income and is not taxable. No application is necessary for child benefits.
In addition to the universal child benefits, special income-related child benefits are paid for children under the age of seven during the income year.
Who is entitled to child benefits?
Everyone can be entitled to child benefits, whether they are employed, self-employed or a student.
Child benefits are divided equally between spouses. The same applies if the child's parents are co-habiting if they meet the conditions for joint taxation at the end of the income year.
If both parents work in Iceland, Iceland pays the child benefits as long as both parents are subject to unlimited tax liability in Iceland.
If parents are resident with a child in Iceland and one parent works in Iceland but the other parent works in another Nordic country, the main rule is that the child benefits are paid in Iceland, the country where the child lives. If the amount of benefits in the other country is higher than in Iceland, the social insurance of that country should pay an additional contribution equal to the difference. Contact the social insurance in the country where the child resides for more information on how to apply for an additional contribution to the benefits.
If the family lives in another Nordic country and one parent works in Iceland, the main rule is that the country of residence must pay the child benefits. The exception here would be if the parent living in the other Nordic country does not have paid employment, in which case Iceland will pay the child benefits.
The parent could be entitled to child benefits, but must apply for them specifically. In the case of benefits paid by more than one country, the priority of entitlement is as follows: The first right arises based on the work of an employed or self-employed person, followed by the right based on payment of a pension and lastly the right based on residence.
Child benefits can be payable in Iceland even if the child is not resident there. The condition for this is that the child must be dependent on an individual who is an EEA national, is employed in Iceland and bears unlimited tax liability there.
A single parent receives the entire child benefits for his/her dependent child.
If a couple separates before the end of the year, the child benefit is calculated as for a single parent based on the couple's tax return.
Can a parent receive Icelandic child benefits after moving abroad?
Parents who move with their children to another Nordic country may be entitled to child benefit for one year after their move, and in such case proportionally to the time they lived in Iceland during the income year. As child benefits are paid concurrently in the other Nordic countries but retroactively in Iceland, parents moving abroad may receive benefits from two countries at the same time, even though these are being paid for different periods. Conversely, this means that parents moving to Iceland from another Nordic country may not receive child benefits from the date they move to Iceland until their income tax assessment the following year, when Icelandic child benefits begin.
Students who study abroad may be entitled to child benefits if their application for tax residency is approved. As child benefits are determined based on income tax returns, in the case of a couple, information on both parties’ incomes must be available in all cases. Child benefits or similar payments from abroad are deducted from Icelandic child benefits. Advance payments cannot be calculated until an income tax return is available, together with information on benefits received from abroad.
Who should I contact if I have questions?
More information can be found on the website of the Directorate of Internal Revenue. You can also get information from a service advisor by telephone at +354 442 1000.
Please fill in our contact form if you have any questions or if you have encountered an obstacle in another Nordic country.
NB! If you have questions regarding the processing of a specific case or application, or other personal matters, please contact the relevant authority directly.
